Vietnamese Economy on Track: IMF

According to IMF, real GDP growth rose to 8.4 per cent in 2005, spurred by strong domestic and external demand, and it remained robust in the first half of 2006 as continued strong domestic consumption and rising export growth offset a slowdown in public investment.

 

The continued brisk pace of exports and resulting strengthening of the current account, together with strong official development assistance (ODA) and foreign direct investment (FDI) has kept the balance of payments in comfortable surplus. Gross official reserves rose from US$6.3 billion at end-2004 to US$8.6 billion as of end-2005, and to nearly US$11 billion as of end-June.

The outlook for the rest of 2006 is positive. GDP growth is projected to be close to the official target of eight per cent in 2006. The rise in international oil prices, together with the continuing boom in non-oil exports, is projected to keep the external current account in a small surplus, which together with buoyant ODA, FDI and incipient private capital inflows would lead to a continuing rise in reserves.

 

IMF praised Vietnam's impressive record of sustained high growth and rapid poverty reduction. Executive directors underscored that faster reforms of previously-protected industries would be essential to enable the economy to reap the full benefits from Vietnam's forthcoming WTO accession.

 

Directors noted that the short-term outlook is broadly positive, but medium-term prospects are subject to some uncertainties. Inflation remains higher and more entrenched than in most other Asian countries and, under the new five-year socio-economic development plan, growth will continue to rely heavily on public investment, whose quality remains uncertain.

 

Directors welcomed Vietnam's banking sector reform roadmap and the plans to convert the State Bank of Vietnam into a modern central bank. While supporting the government's plans to accelerate the issuance of equity in state-owned banks, directors stressed that adequate strategic foreign investor participation would be important to help improve governance.

 

Directors welcomed the authorities' plans to restructure and issue equity in most state-owned enterprises by 2010. They urged the authorities to grant managers full autonomy to make their own pricing and investment decisions. In this connection, directors welcomed the recently-announced plans to liberalise the prices of cement, steel and fertiliser and reduce state subsidies in the energy sector.

 

Directors stressed that a continuing opening up of the trade and investment regimes would be key to private sector-led growth. They urged the authorities to implement the Common Investment Law and Unified Enterprise Law to level the playing field, while preventing any increase in government intervention.

 

Table 1. Vietnam: Selected Economic Indicators, 2002-07
Nominal GDP (2005): US$52.8 billion			GDP per capita (2005): US$636
Population (2005): 83.12 million			Fund quota: SDR 329.1 million
	2002	2003	2004	2005	2006 Proj.	2007 Proj.
Real GDP (annual percentage change)	7.1	7.3	7.8	8.4	7.8	7.6
Inflation (End of period)	4.0	2.9	9.7	8.8	7.7	6.5
Current account balance (including official transfers)
(in millions of U.S. dollars)	-673	-1,932	-1,565	218	164	-505
(in per cent of GDP)	-1.9	-4.9	-3.4	0.4	0.3	-0.7
Foreign exchange reserves (in millions of U.S. dollars, end of period)
Gross official reserves, including gold	3,692	5,620	6,314	8,557	11,458	15,357
(in weeks of next year's imports of goods and non-factor services)	7.2	8.7	8.5	9.8	11.2	12.9
External debt (in per cent of GDP)	35.0	33.8	33.9	32.5	32.6	32.1
Per capita GDP (in U.S. dollars)	440	492	553	636	715	793
Source: Data provided by the authorities; and IMF staff estimates and projections.